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This article first appeared in The Edge Financial Daily, on October 27, 2015.
 

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Brent-Crude_FD_27Oct15_theedgemarketsKUALA LUMPUR: Budget 2016 which was tabled last Friday could be reviewed should Brent crude oil prices exceed US$48 (RM203) per barrel, according to Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah.

Ahmad Husni explained that Budget 2016 was tabled with the assumption that Brent crude would average US$48 a barrel. As such, oil prices need to stabilise at that level and rise further to justify any potential budget review.

“What I mean by review here is if Brent crude oil prices surpass US$48 per barrel, it will mean more revenue for the country and we can [then] review the budget in order to give more to the rakyat,” Ahmad Husni told reporters after officiating at the Malaysian Institute of Accountants’ (MIA) International Accountants Conference 2015 here yesterday.

The minister added that having stable oil prices is vital as the country cannot afford to exceed its fiscal deficit target of 3.2% to gross domestic product (GDP) for 2015, and has to maintain a healthy debt-to-GDP ratio.

Over the last one year, Brent had fallen to current levels of US$48.21 per barrel from an intraday high of about US$88 a barrel on Oct 29, 2014. Lower oil prices prompted the government to revise Budget 2015 in January this year.

Ahmad Husni also stressed that Budget 2016 did not come without its challenges, as the government needed to take every element into consideration.

He said policymakers had considered the impact of the world’s economic slowdown on Malaysia.

“The challenge for Budget 2016 is we need to take into account the global economic slowdown and at the same time ensure sustainable growth at 4% to 5% for our country. Sustainable growth is important as it has a systemic effect.

“Without growth, investments [in Malaysia] would be lower, and unemployment would be high.

“We also need to focus on productivity to ensure that we are on the right path towards becoming a high-income nation, and at the same time, we need to consider the needs of those groups, which are affected by the higher costs of living in the country,” said Ahmad Husni.

Earlier in his keynote address at the conference, Ahmad Husni said the adoption of accrual accounting and outcome-based budgeting is more than just an accounting exercise.

“It brings a transformational impact … it is a key driver to improved public financial management and decision-making,[and] will reflect the full economic impact of our policy decisions,” he said.

It was earlier reported that the government’s plan to switch from a cash accounting system to an accrual accounting system had been delayed and will only be implemented after certain laws are passed. Initially, the proposed plan was for the public sector to make the switch on Jan 1.

The Ministry of Finance then told The Edge weekly that the implementation of accrual accounting had yet to take place and is scheduled to happen on a date to be determined after the “relevant acts are tabled before Parliament”.

MIA president Datuk Mohammad Faiz Azmi in his keynote address at the conference said the recommendations of the Committee for the Strengthening of the Accounting Profession (CSAP) will reshape the landscape of the profession.

“We have to recognise that the environment has changed and that our role as accountants has never been more in demand, as an example, [how the] CSAP looked at the ratio of accountants to population in successful economies.

“In Malaysia, it is about 1,000 people per accountant compared to the more advanced economies, where the range is 100 to 200 people per accountant — so it shows that doubling our numbers to 60,000 accountants must make sense,” said Mohammad Faiz.

The MIA International Accountants Conference 2015 with the theme “Today’s Synergy. Tomorrow’s Reality” is anticipated to be one of the largest gatherings of accountants in the world, and ends its two-day run today.

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